BCG is used to analysis AirAsia product or service portfolio. Open new route is question mark because it contains potential risks (legal and regulation) in new country. Besides, SimCard and online shopping service are newly introduced to customers and under low market share. AirAsia will invest and adverts their services more at this stage in order to achieve good quality and profitable. Additional service like AirAsiaGo, Rokki, insurance and leasing assets are the star of AirAsia. In 2016, Rokki earned RM503K and insurance earned RM13 million which are under high market growth to achieve more profitable. The added value services in star is test their value at market. The star will follow the product life cycle stage, it may be decline to the dog or mature to the cash cow stage on the BCG.
Next, cash cow of AirAsia is tickets sales for worldwide route especially Malaysia has which are the main income source. Merchandise and F&B also another cash cow that earned RM87.02 million in 2016. Due to high demand of customer request, it has high market share which is highest profit to AirAsia. The dog in AirAsia is ancillary service that earned RM1.26 billion, which mean the lower down operation cost due to the “self-check-in” system introduced. Besides, some route has turned down as dog because AirAsia has stop all flight service to certain country like London. Due to low profitable and slow market growth, London flight is declined from star stage.
1.1 Internal Situational Analysis (SWOT)
SWOT is used to analyse the strengths, weakness, opportunities and threats that AirAsia faced. Major strength of AirAsia is able offers low fare tickets to customers without compromise the service quality. Besides, low operational and maintenance cost of AirAsia because they have single type fleets that easy for pilot dispatch and maintenance it compare with other airlines. AirAsia is effective use of online reservation systems, no frill and easy check to reduce operational cost. Multi-skilled management team of AirAsia and great IT infrastructure to help them serve better in order to achieve goal and service quality in the low-cost market.
Due to low cost and profit, weakness of AirAsia is provides limited service to customers and lack of manpower. Therefore, millions of customers and issues like flight delay need to handle in an amount required time when there is peak time especially at airport. Besides, a huge amount of investment needed for implementation of latest technologies.
Next, opportunity can be increase in the worldwide especially Asia market due to low-cost fare model of airline and open new routes that favourable through long haul flight. Additional deal and customer services will prove beneficial and profitability for the company in order to remain sustainable for future. Due to the high fuel prices or economic down, some competitors are falling back is one of the opportunity.
Threats happen when AirAsia’s competitor is increased in worldwide especially Asia which will affect the growth and sustainability of airline negatively in future (Shaw, 2012). From this case, full service airlines like MAS are start cut costs to compete with AirAsia. Hence, operation cost of AirAsia is increased to produce value-added services for consumers. Due to high fuel prices, AirAsia’s profit has decreased. Other threats like online sales system disruption, terrorism attack and disasters that affect consumer loyalty and confidence. Besides, the control of aviation regulation and government policy is increased.
1.2 Consideration of strategic option (Ansoff and Porter)
Figure 5: Ansoff matrix
Market Penetration is implemented in AirAsia by introduced big loyalty program and mobile application to customer. Free seat sales is a strategy that increase frequency of flight. In product development, there have various ancillary products and services introduced like roKKi (board wi-fi), Xcite in flight environment, new menu of gourmet food and provide private space. Whereas, market development of AirAsia has its expertise and experience of flight business to expand new hubs in other country like Japan, India and others. Diversification is implemented when freight services of AirAsia is expanding to scheduled flights, which is includes cargo, courier and mail service.
Figure 6: Porter’s generic strategies
The business strategy of AirAsia is more focus on cost leadership in specific market especially prices sensitive customers. Therefore, AirAsia provides low fare services which is lower than other competitors to build up competitive advantage. Besides, operation effectiveness and outstanding efficiency are characteristics of AirAsia. Besides, the bigger cost advantages enable AirAsia to compete and provide the lowest possible price than other competitor to consumers. Hence, cost is focus as competitive preference to differentiation in airline industry.
2.0 Strategic implementation of Information Technology
AirAsia has implemented few systems for marketing and sales activities like Yield Management System (YMS) and Computer Reservation System (CRS). Besides, Enterprise Resource Planning System (ERP) also implemented in operation activity.
YMS also known as Revenue Management System that used for AirAsia’s online seats system. This helps to maximize expected revenue by anticipates, understands and reacts to the customer’s behaviour. In order to allocate capacity of revenue, fixed number of available seats are selling at various prices in different period time. Commonly, a reservation that done early will be cheaper than lately booking. Besides, favourable route also will be adjusting price based on amount of customer demand. The higher demand for the route, the price more expensive.
In past couple years, CRS is an integrated web-based booking and inventory system by Navitaire and implemented to help AirAsia future grow (Navitaire, 2005). This system is using direct sales engine which is includes airport departure control, help and call centre by using internet access. It has successful eliminated the travel agents and sales commissions. Besides, AirAsia has introduced the first ticketless and advanced boarding passes through online booking. For mobile booking, Wireless Delivery System (WDS) can be implement.
To increase effectivity of AirAsia’s operation, a full ERP system is implemented to maintain process integrity, data retrieval processes and reduce processing times for financial report. (Microsoft Malaysia) With all IT strategies implementations, AirAsia is operated as low-cost model by maximizing revenue (YMS) and reducing operation costs (CRS, ERP). From the cost saving, AirAsia able reduced tickets price, discounts and others services for customers. In future, advanced planning and scheduling (APS) system is a potential strategy that can implement for tracking costs based on the operation activities and allocates costs based on resources demand.